Practical case

The marriage composed by Mr. RJR and Mrs. MAT, resident in Seville, has had two homes rented throughout 2023. The relationship between income, expenses and other data of interest for determining net income are as follows:

1. First home rented for 900 euros per month.

The property was purchased in 2003 for an amount equivalent to 90,000 euros, plus 7,000 euros in expenses. To purchase the property, they requested a mortgage loan from Bank "Z" for which they have paid the amount of 400 euros in interest and 2,200 euros in capital repayment throughout 2023. The cadastral value of said property, which was revised in 2011, amounts to 66,200 euros, of which 27,080 euros correspond to the value of the land and 39,120 euros to the construction value, according to the data shown on the IBI receipt for the year 2023, with its cadastral reference being 4927802TG3442F0088ZR.

The cost of the furniture installed in the home, according to the 2016 invoice, amounts to 6,900 euros. The expenses paid for said housing in 2023 were as follows:

Real Estate Tax (IBI): 260
Community: 850
Facade plastering: 210

2. Second home rented to a brother of Mrs. MAT, for 300 euros per month.

The property was purchased in 2008 for 45,000 euros, including the costs associated with the purchase. The cadastral value of the property is 13,800 euros, of which 4,830 euros correspond to the value of the land and 8,970 euros to the value of the construction. This cadastral value was last revised in 2011. The cadastral reference of said property is 4927802TG3442F0134YK.

The expenses of this home throughout 2023 have been as follows:

Real Estate Tax (IBI): 91
Loan interest: 4.200
Capital amortization: 1.202
Community: 720
Air conditioning installation (01-07-23): 1,500

Determine the reduced net return on real estate capital corresponding to said homes in the year 2023, in the case of joint taxation.

Solution:

1. First rented home:

Gross income (900 x 12) 10,800

Deductible expenses :

Interest on capital invested in the acquisition of housing (mortgage loan) ⁽¹⁾: 400
Repair and maintenance costs ⁽¹⁾: 210
Taxes, surcharges and fees (IBI): 260
Community fees): 850
Amortization:
- * Housing (3% x 58,200) ⁽²⁾ = 1.746
- * Furniture (10% s/6,900) ⁽³⁾ = 690

Total deductible expenses: 4.156

Net return (10,800 – 4,156) = 6,644

Reduction for housing rental (60% /6,644) = 3,986.40

Reduced net performance: (6,644 – 3,986.40) = 2,657.60

Notes on the solution of p first rented dwelling :

⁽¹⁾ The total amount to be deducted for interest on external capital invested in the acquisition of the property and the costs of repair and maintenance of the property will be limited to the amount of the gross income obtained. The excess may be deducted in the following four years (article 23.a).1 of the Tax Law. In this case the total amount (400 + 210 = 610 euros) is much lower than the gross returns (10,800 euros). ^{(Return interests)} ^{(Return repair costs)}

⁽²⁾ To determine the amounts allocated to the amortization of the property, the following data is taken into account:

Cadastral value: 65,200 euros
Cadastral value of construction: 39,120 euros
% cadastral value of construction/cadastral value [39,120 ÷ 65,200) x 100] = 60%
Acquisition cost (including expenses associated with the purchase) (90,000 + 7,000) = 97,000 euros
Acquisition cost, excluding land value (97,000 x 60%) = 58,200 euros

According to article 14.2.a) of the Personal Income Tax Regulations, the amortization may not exceed, in each year, the result of applying 3% to the highest of the following values: cadastral value of construction (39,120 euros) or acquisition cost, excluding land (58,200 euros). ^(Back)

⁽³⁾ According to article 14.2.b) of the Personal Income Tax Regulations, the amortization may not exceed, in each year, the result of applying to the acquisition costs paid for the acquisition of the furniture (transferred together with the home) the amortization coefficients determined in accordance with the simplified amortization table approved by Order of March 27, 1998, referred to in article 30.1.ª of the aforementioned Regulation, that is, 10%. ^(Back)

2. Second home rented to family.

The highest value of the following shall be computed as the minimum total net return:

2.1 The difference between gross income and deductible expenses.

Gross income (300 x 12) = 3,600

Deductible expenses :

Interest on capital invested in the acquisition of housing (mortgage loan) ⁽¹⁾ : 3.600

* Limit: gross income: 3.600 euros

* 2023 amount pending deduction in the following 4 years: 4,200 -3,600 = 600
Taxes, surcharges and fees (IBI): 91
Community fees: 720
Amortization:

* Housing (3% x 29,250) ⁽²⁾ = 877.50

* Air conditioning [6/12 x (10% s/1,500] ⁽³⁾ = 75

Total deductible expenses: 5.363,50

Net return (3,600 – 5,363.50) = -1,763.50

Reduction for housing rental ⁽⁴⁾ : 0

Reduced net performance: -1,763.50

2.2. 2% of the cadastral value (2% x 13,800) = 276

Net performance:

The highest value of the two calculated in letters a) and b) will be declared. That is, 276.

Notes to the solution of the second rented home :

⁽²⁾ To determine the amounts allocated to the amortization of the property, the following data is taken into account:

Cadastral value: 13,800 euros
Cadastral value of construction: 8,970 euros
% cadastral value of construction/cadastral value [8,970 ÷ 13,800) x 100] = 65%

Acquisition cost, excluding land value (45,000 x 65%) = 29,250 euros ^(Back)

⁽⁴⁾ The reduction for leasing properties used for housing does not apply because the net yield is negative. ^(Back)

3. Sum of reduced net returns on real estate capital

The sum of the reduced net returns on real estate capital from the two leases: (2,657.60 + 276) = 2,933.60